Tieup with ICICI and a strong network gives Vodafone head start in payment banking

Experts say telecom operators are the ideal candidates to set up these payment banks, given their significant customer base in rural areas and well-entrenched distribution networks.MUMBAI: Mobile operator Vodafone's tieup with ICICI Bank for its M-Pesa mobile money transfer service and a strong network of 90,000 business correspondents will give it a head start in the payment banking industry, a top official said.

Vodafone is among the first 11 entities that have got the Reserve Bank of India's nod to operate payment banks, which can accept deposits up to Rs 1 lakh from individuals and issue debit cards but cannot lend money or issue credit cards.

The telco now plans to tie up with different financial institutions to offer services such as micro investments, pension, insurance, and loans, which it cannot do alone under the rules of its new payments bank licence, said Suresh Sethi, CEO for M-Pesa at Vodafone. It plans to use its 90,000 business correspondents to market these products and also tap into the M-Pesa customer base. Once the payments bank is in action, Vodafone will be able to open its own savings bank account, which will eliminate the need for ICICI Bank accounts to be linked to M-Pesa accounts.

Sethi said it will give Vodafone flexibility to expand outlets. Right now, ICICI Bank has to approve them. Vodafone can also set up its own process to collect information for know your customer (KYC) norms.